"There is certain
relief in change, even though it be from bad to worse! As I have often found in
traveling in a stagecoach, that it is often a comfort to shift one's position,
and be bruised in a new place."
—Washington Irving
(American, 183-1859)
Word for the day
Nonce (n)
The present, or immediate,
occasion or purpose (usually used in the phrase for the nonce).
Malice towards none
I am sure not many Indians
would share Shane Warne's sentiments towards Steve Waugh!
First random thought this morning
Have you ever been afraid of saying or writing something, thinking
someone might have said or written the same thing before.
I have always been afraid.
But now, after so many years of living under constant fear, I have
accepted that there is nothing that has not been said, written or done before.
Plagiarism, copyrights, patents and originality is all farce.
We are already half way up!
As per various estimates, globally over US$7tr worth of government
bonds are trading at zero or negative yield, meaning holders of these bonds
expect to receive less money in interest and principle payments than the money
they are paying today to buy these bonds. Japanese government benchmark 10yr
securities are latest entrants to the club. Besides, an alarmingly large amount
of bonds are trading at yields below 1%. Many of these bonds are longer
maturity (5yrs or more) bonds.
Zero or sub-zero yields on bonds implies, holders of these bonds
are expecting no inflation, no growth and permanent QE for a really long period
of time. For records, In 2008 there was no bond at zero or negative yield and
people were expecting hyper-inflation and EMs, especially BRICS, growing at
high single digits.
As per the recent report on consumer sentiments by Nielsen,
"More than half (55%) of respondents around the world believed they were
in recession in the fourth quarter of 2015, which increased slightly from the
start of that year (53%).
Given my limited knowledge of the global market and investors'
behavior, I am failing to understand how one could panic with this benchmark of
expectations and sentiments, unless one is anticipating a much deeper recession
and prolonged deflation in the investment strategy. Of course, considering the
excesses of governments and central bankers in past one decade, it is not at
all difficult to fathom such eventuality.
But the mute point is what would bring the world out of this deep
pit?
Historically, major wars, significant productivity gains from
innovations and new technologies, and positive changes in demography have
driven the recovery from great recessions.
In most of the instances, recovery has resulted in material
adjustment in the global terms of trade and rebalancing of strategic power
equations.
Whatever I am reading and listening, I do not get a sense of any
of these eventualities being factored in investors' anticipation.
We are witnessing one of the largest immigration in the human
history. This will change demography of the west materially, sooner than later.
The tremendous gains made from innovation in energy space and use of internet
in past one decade are there for everyone to see. Post WWI, terrorism has
perhaps killed more people than anything else. The war on terrorism is at its
peak. Rogue elements in Iraq, Iran, Libya, Afghanistan, Sudan, Nicaragua etc.
have been largely neutralized. The pressure on the remaining pockets like
Syria, Pakistan, Yemen, North Korea is rising every day.
Huge transfer of wealth is taking place from oil producing
countries to the oil consumers. This reverses one of the major economic trend
in post WWII era. CNY has already entered IMF reserve currency basket. The
world which looked uni-polar post end of cold war, is suddenly multi-polar.
So in my view, the worst has already happened, and we are already
in corrective phase. The panic in bond market may be just a vote of no
confidence in unconventional strategies of central banks...more on this later
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